TRANSPORATION PASSES
1. Overview
Transportation passes are a common benefit provided by employers to employees to facilitate their daily commute. These may include passes for public transit systems such as buses, subways, streetcars, or commuter trains. The Canada Revenue Agency (CRA) has specific guidelines to determine when these benefits are taxable and how they should be reported by both employers and employees.
2. Tax Implications
The tax treatment of transportation passes depends on various factors, including the purpose and recipient of the benefit:
- Taxable Benefits: In most cases, transportation passes provided to employees are considered taxable benefits. The fair market value (FMV) of the pass must be included in the employee's income and reported on their T4 slip.
- Non-Taxable Benefits: If the transportation passes are provided exclusively for work-related travel or are offered under specific arrangements (e.g., for transit employees), they may be considered non-taxable.
3. Special Rules for Transit Companies
Employers in the transportation industry may provide passes to their employees under different conditions:
- Current Employees: Free or discounted transit passes provided to current employees for personal use are generally taxable benefits, unless they are strictly for work-related travel.
- Retired Employees: Transit passes provided to retired employees are typically non-taxable, provided they are part of a standard retirement package.
- Family Members: Passes given to family members of current or retired employees are considered taxable benefits and must be included in the recipient’s income.
4. Airline Employee Passes
The CRA has specific rules regarding airline employee travel benefits:
- Free or discounted airline passes are taxable if the employee travels on a "space-available" basis and pays less than 50% of the economy fare available to the public.
- The taxable benefit is calculated as the difference between 50% of the economy fare and the amount reimbursed by the employee for the trip.
5. Employer Obligations
Employers providing transportation passes must:
- Determine the FMV of the passes provided to employees or their families.
- Report taxable benefits on employees' T4 slips.
- Maintain detailed records of passes distributed, including their value and the recipients.
6. Examples
- Example 1: A city transit company provides free monthly passes to its employees. These are taxable benefits unless the passes are strictly used for work-related travel.
- Example 2: An airline employee uses a discounted travel pass and pays 40% of the economy fare. The difference between 50% of the fare and the amount paid is considered a taxable benefit.
7. Additional CRA Guidance
For more information on transportation passes and their tax treatment, refer to the following CRA resources:
8. Conclusion
Transportation passes are valuable benefits for employees but often come with tax implications. Employers and employees must understand the CRA guidelines to ensure proper reporting and compliance with tax laws.
